Innovation Outposts and The Evolution of Corporate R&D

I first met Evangelos Simoudis when he ran IBM’s Business Intelligence Solutions Division and then as CEO of his first startup Customer Analytics. Evangelos has spent the last 15 years as a Venture Capitalist, first at Apax Partners and later at Trident Capital. During the last three years he’s worked with over 100 companies, many of which established Innovation Outposts in Silicon Valley. He’s now helping companies get the most out of their relationships with Silicon Valley.

Evangelos writes extensively about the future of corporate innovation on his blog.

Evangelos and I are working on what we hope will become a book about the new model for corporate entrepreneurship. His insights about how large companies are using the Valley is the core of this series of four co-authored blog posts.


The last 40 years have seen an explosive adoption of new technologies (social media, telecom, life sciences, etc.) and the emergence of new industries, markets and customers. Not only are the number of new technologies and entrants growing, but also increasing is the rate at which technology is disrupting existing companies. As a result, while companies are facing continuous disruption, current corporate organizational strategies and structures have failed to keep pace with the rapid pace of innovation.

This burst of technology innovation and attendant disruption to corporate strategies and organizational structures is nothing new. As Carlota Perez points out, (see Figure 1) technology revolutions happen every half-century or so. According to Perez, there have been five of these technology revolutions in the last 240 years.

carlota perez 5 tech cycles

Figure 1: Five technology revolutions   source: Carlota Perez

Perez divides technology revolutions into two periods (Figure 2): The Installation Period and the Deployment Period.  In the Installation Period, a great surge of technology development (Perez calls this Irruption) is followed by an explosion of investment (called the Frenzy.) This is followed by a financial crash and then the Deployment period when the technology becomes widely adopted. In between the Installation and Deployment periods lies a turning point called Institutional Adjustment when institutions (companies, society, et al) adjust to the new technologies.

life cycle of tech

Figure 2: The two periods characterizing technology revolutions   source: Carlota Perez

Historically during this Institutional Adjustment period companies have to adjust their corporate strategies to deal with these technology shifts. The change in corporate strategy forces a change in the structure of how a company is organized. In the U.S. we’ve gone through three of these structural shifts. We’re now in the middle of the fourth. Lets quickly review them and see what these past shifts can tell us about the future of corporate R&D.

Institutional Adjustments
In the first 50 years of commerce in the then-new United States, most businesses were general merchants, buying and selling all types of products as exporters, wholesaler, importers, etc. By 1840 companies began to specialize in a single type of goods like cotton, wheat or drugs, etc. and concentrated on a single part of the supply chain – importing, distribution, wholesale, retail. This shift from general merchants to specialists was the first structural shift in American commerce.

These specialist companies were still small local businesses. Ownership and management were one and the same – the owners managed, and there were no salaried middle managers or administrators.

In the 1850’s and 60’s, the railroads changed all that. The railroads initially served a region of the country, but very quickly grew into nationwide companies. The last quarter of the 19th century, what Perez calls the Age of Steel and Heavy Engineering, saw the growth of America’s first national corporations in railroads, steel, telegraph, meatpacking, and industrial equipment. These growing national companies were challenged to figure out how to organize an organization of increased complexity that resulted from their large size, and geographic scale as well as their horizontal and vertical integration.  For example, US Steel had integrated vertically and was involved in the mining of the iron ore all the way to the production of various steel products, e.g., nails. These new corporate strategies drove companies to build structures around functions (manufacturing, purchasing, sales, etc.) and to develop professional managers and management hierarchies to run them. Less than 50 years later, by the beginning of the 20th century, the modern form of the corporation had emerged. (For the best explanation of this see Chandler’s The Visible Hand.) This shift from small businesses to corporations organized by function was the second structural shift in American commerce.

By the 1920’s, in Perez’s Age of the Automobile and Oil, companies once again faced new strategic pressures as physical distances in the United States limited the reach of day-to-day hands-on management. In addition, firms found themselves now managing diverse product lines. In response, another structural shift in corporate organization occurred. In the 1920’s companies moved from monolithic functional organizations (sales, marketing, manufacturing, purchasing, etc.) and reorganized into operating divisions (by product, territory, brand, etc.), each with its own profit and loss responsibility. This strategy-to-structure shift from functional organizations to operating divisions was led by DuPont and popularized by General Motors and quickly followed by Standard Oil and Sears. This was the third structural shift in American commerce.

The 1970’s marked the beginning of our current technology revolution: The Age of Information Technologies, Telecommunications and Biotech. This revolution is not only creating new industries but also affecting existing ones – from retail to manufacturing, and from transportation to financial services. We are now somewhere between the end of Installation and the beginning Deployment – that confusing period between the end of the Frenzy and the beginning of the Turning Point, during which time institutional adjustments are necessary. Existing companies are starting to feel the pressures of new technologies and the massive wave of new entrants fueled by the explosion of investment from a recent form of financing – venture capital. (Venture capital firms, as we know them only date back to the 1970s.)  Companies facing continuous disruption need to find new corporate strategies and structures. This fourth structural shift in American commerce is the focus of this series of blog posts. In particular, we are going to focus on how each of these shifts has changed the organization and role of Corporate R&D.

Corporate R&D Evolves With Each New Structural Shift
Each institutional adjustment also changed how companies innovated and built new products. During the Age of Steel and Heavy Engineering in the 1870’s to 1920’s, innovation occurred outside the corporation via independent inventors and small companies. Inventors such as Thomas Edison, Alexander Graham Bell and Samuel Colt come to mind. Patents, inventions and small companies were sold to larger corporations. By the 1920’s, in the Age of the Automobile and Oil, large companies sought to control the new product development process. To do so they brought innovation and invention into the company by setting up storied Corporate R&D Labs such as GE Labs, DuPont Labs, Bell Labs, IBM Research, 3M, Xerox PARC, and Kodak Labs. By the 1950’s Shumpeter observed that in-house R&D had replaced the inventor-entrepreneur. The technology cycle was in the Synergy and Maturity phase, and little innovation was happening outside of companies. It was corporate R&D labs that set the pace of innovation in each industry.

Corporate R&D Labs

As the Age of Information Technologies and Telecommunications gained momentum in the 1970’s, the Irruption phase of this new technology cycle created an onslaught of new startups funded by venture capital. Think of companies like Apple, Digital Equipment Corporation, Sun Microsystems and Genentech.  The beginning of a new technology cycle didn’t come with a memo or a formal announcement. Corporate R&D and Strategy groups that had been successful for the past 70 years were finding their traditional methods no longer worked.

Historically Corporate Strategy and R&D groups worked hand-in-hand to keep companies competitive. They were adept at analyzing competitors, trends, new technologies and potential disruptors to the corporation’s business. Corporate Strategy would develop plans for new products, and R&D would then create and patent the disruptive innovations. Tasked with “looking over the horizon,” Corporate R&D and Strategy organizations looked at the last technology cycle and the existing incumbents instead of seeing the new technology cycle and the new wave of startups.

Corporate R&D in the Age of the CEO as Chief Execution Officer
Ironically as the new technology cycle went from Irruption to Frenzy (remember Perez’s stages of technology revolutions), existing corporations headed in the other direction. Over the past 15-20 years as startups were funded with ever-increasing waves of investment, companies have cut back their investment in innovation. Corporations focused on financial metrics like Return On Net Assets and Internal Rate of Return to reap the benefits of the last technology cycle. This meant R&D organizations have been pushed to work more on D (development) and less on R (research.) Researchers addressed short-term, Horizon 1 problems (existing business models, last technology cycle) rather than working on potentially disruptive Horizon 3 ideas from the next technology cycle. (See here for background on horizons.)

As a result, corporate R&D organizations have been producing sustaining innovations that protect and prolong the life of existing business models and their products and revenue streams. While this optimizes short-term Return On Net Assets and Internal Rate of Return, it destroys long-term innovation and investment in the next technology cycle.

While that’s the good news for short to mid-term revenue growth, the bad news is that corporate R&D’s is investing much less on disruptive new ideas and the next technology cycle and instead focusing on the development of incremental technologies. The result is a brain-drain of researchers who want to do the next big thing. Corporate researchers are voting with their feet, leaving to join startups or to start companies themselves, further hampering corporate innovation efforts. Ironically as the general pace of innovation accelerates outside companies, internal R&D organizations no longer have the capability to disrupt or anticipate disruptions.

Because of declining corporate investment in disruptive research and business model innovation, the typical corporate R&D organization can’t:

  • Keep up with technology innovations: Even corporations with high R&D spending are concluding that their existing R&D model cannot keep pace with exponential technologies and the accelerating pace of information technologies, biotechnologies, and materials
  • Address the global creation of innovation: Disruptive innovation is now created around the world by companies of any size, many of them startups. These companies are funded by abundant capital from institutional venture investors, private investors, and other sources. Our hyperconnected world is amplifying the effects of these companies and enabling them to have global impact, as seen with companies from Israel, India, China, and Brazil
  • Properly align technology with other types of innovation: Corporate R&D remains focused on technology innovation. Certainly these organizations have little, or no, ability to appreciate and create other forms of innovation

By the 1990’s corporate innovation strategies changed to a focus on startups—investing in, partnering with or buying them.  Companies built corporate venture capital and business development groups.

But by 2010, this technology cycle moved into the Frenzy phase of innovation investment. Corporate R&D Labs could not keep up with the pace of external invention.  Increasingly corporate venture capital involved too long of a lead-time for corporate technology investments to pay off.

To adapt to the current frenetic pace of innovation, corporations have created a new organizational structure called the Innovation Outpost. They are placing these outposts at the center of the source of innovation: startup ecosystems.

The next 3 posts will explore the rise of Innovation Outposts, Six Critical Decisions Before Establishing an Innovation Outpost and How to Set Up a Corporate Innovation Outpost for Success.

Be sure to check out about the future of corporate innovation on Evangelos Simoudis blog.

Entrepreneurs are Everywhere Show No. 11: Pat Sullivan and Sebastian Jackson

Startup founders strive to turn their dreams into reality, and the mentors who guide them often learn as much as they teach.

How startup ideas are developed and nurtured was the focus of conversations with the latest guests on Entrepreneurs are Everywhere, my radio show on Sirius XM Channel 111.

Pat Sullivan

Pat Sullivan

Joining me in the Stanford University studio were:

Sebastian Jackson

Sebastian Jackson

Listen to the full interviews by downloading them from SoundCloud here and here. (And download any of the past shows here.)

Clips from their interviews are below, but first a word about the show:

Entrepreneurs are Everywhere airs Thursdays at 1 pm Pacific, 4 pm Eastern on Sirius XM Channel 111. It follows the entrepreneurial journeys of founders sharing their experiences of what it takes to build a startup – from restaurants to rocket scientists, to online gifts to online groceries to entrepreneurial education and more.

The program examines the DNA of entrepreneurs: what makes them tick, how they came up with their ideas; and explores the habits that make them successful, and the highs, lows and pivots that pushed them forward.

Pat Sullivan is a serial entrepreneur who has been building software for more than 30 years, starting with the ACT! contact software he created in 1985. Pat was named one of the “80 Most Influential People in Sales and Marketing History” and was twice named Ernst & Young “Entrepreneur of the Year” for both ACT! and SalesLogix software.

Having had terrific mentors over the years, Pat makes it a point to pay his what he’s learned forward. He’s learned that mentorship is a two-way street:

I … meet with any entrepreneur who has a legitimate idea, or is in the process of starting something, for two reasons. One (is to) give back. The other is, I find that I always learn something. Younger people than I, they’re into things that I’ve never thought of. (For example) I thought Twitter was a really stupid idea, until my kids explained that it really wasn’t. I always learn something extraordinarily useful by meeting with others. 

… There are many times where I don’t fully understand what exactly it is that they’re trying to do, and the domain expertise that they have … but there are many things that are general in nature, that I have that they don’t have, and that I can give to them.

If you can’t hear the clip, click here.

Here are some of the things his mentors taught him:

Once I was agonizing over the fact that it took me a really, really long time to recognize that an executive … I hired just wasn’t making it. … It took me forever to decide to fire him. I … talked to my mentor and I was complaining how long it took. He listened, and listened, listened, just quiet, and all of a sudden he said, “You know, I think it’s great that everybody back at the office knows that you’re not quick on the trigger.” It totally … changed my perspective.

Another … mentor … said …: “You know, I may not be the smartest, I may not be the richest, but I can out-work you.” …

That has always stuck with me, that I’m not the smartest, I’m not the brightest, I may not have the most money, but I can out-work you. 

If you can’t hear the clip, click here.

Sebastian Jackson got his start cutting hair and dreaming of the day he might have is own barbershop. He said his early life had a profound impact on the way he thinks:

Sebastian: My mother, she suffers from schizophrenia. She was diagnosed when I was 1 (or) 2 years old. She’s always had this imagination as a part of that illness. It’s kind of helped me imagine things, right? …. Also I have to work, to execute on that imagination, just so that I know I’m not suffering from the same illness, that if I execute then it’s real.

Steve:  There is a fine line between insanity and genius.

Sebastian: There is. In America, I think it’s money; if you can make money from your illness, then you are deemed a genius. 

Steve:  I mean, that is kind of … it’s interesting you say that. I don’t mean to diminish what you went through with your mom but founders with big visions are treated as insane by most people who kind of go, “What do you mean you’re going to create a rocket company?” Or, “What do you mean you’re going to put the auto industry out of business?

Sebastian: Delusions of grandeur.

Steve:  … I think you said the magic word, the distinction between entrepreneurs and just people with ideas are they figure out how to get the resources to actually execute. …

Sebastian: Absolutely. …Oftentimes thought I was crazy but then … another opportunity will present itself or I will create another opportunity and be able to execute on it and that … validated my thinking. …

If you can’t hear the clip, click here. 

Both men are self-motivated and driven.

Pat explained that when he was a computer salesman, he created programs that eased his work problems and challenges. They became the foundation for ACT!

Being in sales, it struck me that, here I was selling computers but couldn’t find a really good reason to actually use one.

… You could some word-processing, a little spreadsheet-type stuff but there wasn’t really anything useful to me as a salesperson. For whatever reason, I began to teach myself programming and built what ultimately became the prototype for the product ACT! 

I did it (on the side) for about three years while I was selling computers. I was building applications that I use day in and day out. Anything that was routine, I hated routine so I would figure out how to program that. The last thing that I built was a contact manager, the ability to track all the information about my prospects, about my customers, so that I could remember them. …I solved a problem that I had.

… I really wish I could say that it was an overnight success. But April of 1987, we shipped the first version of ACT! My partner and I (had finally) decided to do a startup.

Steve:  That was pretty scary, wasn’t it?

Pat: I was a risk-taker. My wife and I discussed it with my partner and his wife over a weekend. I had put a couple of years into building this application. My wife said, “What’s the worst that could happen?”

Well, in Texas, which is where we were at the time, they couldn’t take your house. They couldn’t take one of your cars and they couldn’t take your kids. She said, “If that’s the worst that can happen, then you ought to try it because if you don’t, you’ll never know.”

If you can’t hear the clip, click here.

Sebastian also took a hands-on route:

… Before I started cutting hair for other people, I cut my own hair. … It was a pretty good haircut. … I just used a Schick razor and lined up the edges of my hair. Didn’t cut any off the top. I gave myself kind of a little taper or fade on the side and the back, and it was decent. Used my dad’s clippers. …

It was spring break. I saw other people doing it. My barber did it and I said, “If he can do it, I can do it.” …

Now, that first time kind of validated that I had the ability. The second time, I was so confident that I had actually tried to cut the top down. I left patches and everything everywhere. … It was terrible. …

I went to the barber, and he fixed it.

That first time stuck with me though. I had the confidence that I could do this and I continued to do it.

… From my sophomore year, when I was 15 years old, I started making five bucks a haircut, three bucks a shape-up, and started to travel to different clients in their homes, in their parent’s homes. I made a little bit of pocket change in high school, out of my parent’s garage, and out of other friends’ basements and garages.

If you can’t hear the clip, click here.

Sebastian has a founder’s signature tenaciousness. He had to write four business plans to get the OK to open his barbershop.

Wayne State saw that the previous business had failed, so they said, “No, no, no. No non-profit. We’ve got to make money here. How are you going to pay us?”

I wrote a second business plan and it showed how I would pay them. (It showed) the support I had to raise money to pay them and they still didn’t like that.

The third business plan was a for-profit showing an actual business model. It was very simple. We’re going to cut hair, people are going to pay us money, and then we’re going to pay you a portion of that.

… They said, “You’re onto something here.”  

The fourth one was the social club, which explained how we would create impact within this space …

… Wayne State wanted to create a campus where student life was abundant, where they can really have students live on campus and have a great time. We showed how we could add value there …how we could use a barbershop to create a place where students could come and have a good time, and get a service that actually make money. A service that … they’re willing to pay for. … 

If you can’t hear the clip, click here.

The Social Club Grooming Company has become a community hub, in part because of its Shop Talk monthly panel discussions.

… We bring people of interest in; they tell their story while getting a haircut.  

…As you’re getting your hair cut, you’re on the panel with maybe one other person and it’s a traditional barbershop talk. It’s an audience of people sitting around these 2 barber chairs. We take our other six barber chairs out of the way and we have two barber chairs that are front and center. People sit around and you tell your story. I moderate and then there’s a Q&A between you and the audience. It’s a TED talk in a barbershop.

… The real stickiness here is we’re able to have these unfiltered conversations … where you can tell us some secrets that you may not be willing to talk about in a traditional panel discussion setting.

The barbershop breaks (down social) barriers. If Reggie Bush comes in and does a Shop Talk, or if whomever comes in to a barbershop and there’s a line (to get a hair cut), they have to wait. You’re no longer this celebrity. You’re no longer this influencer 

…It’s a leveler and I think people really appreciate that about the barbershop heritage. … I think … my team … can … execute this and I think it’s because of my … being an entrepreneur and a highly technically skilled barber.

I understand the barbers and I understand a bit about business and I’m asking a lot of questions and I’m getting opportunities like this when I can ask you more questions. … Also, in interacting with our customers every day, I can learn quite a bit. I can ask them questions and really figure out what they want, what they want to pay for, so on and so forth. …

If you can’t hear the clip, click here.

Pat discussed the characteristics of world-class founders and told me why he can’t imagine doing anything else.

Tenacity.… persistence … perseverance. I like the word perseverance because the word severe is in it, and you often face things that are severe. An entrepreneur who is formidable typically finds a way to get through it. I love the book, The Hard Thing About Hard Things (by Ben Horowitz) that there’s always a way …

Steve:  So why do you still do it, after 30 years?

Pat: Well, first of all, it’s the only thing I get paid for, so it makes me a professional. I would be totally unemployable, there’s no one who would hire me, because they always know I’m going to do another startup. (And) doing something with particularly young, really, really bright people, doing something that’s hard, is just a lot of fun. …

If you can’t hear the clip, click here.

Listen to my full interviews with Pat and Sebastian by downloading them from SoundCloud here and here. (And download any of the past shows here.)

Next on Entrepreneurs are Everywhere: Andrew Breen, Vice President of Product Delivery for American Express’s World Service division; and David Binetti, founder of Dinadesa, from the Lean Startup Conference.

Tune in Thursday at 1 pm PT, 4 pm ET on Sirius XM Channel 111.

Lean Startup In Japanese Companies

Implementing the Lean Startup in any company is hard.  All the culture and incentives are designed for execution. Innovation at times seems like you’re swimming up hill.  Now compound that level of effort with trying to put a Lean Startup culture in place in Japan.

According to Takashi Tsutsumi and Masato Iino, Japanese companies tend to be technology centric, obsess over quality and have weak leadership.  Technology centric leads to companies ignoring their customers and the challenge is that they don’t do customer interviews.  The obsession with quality leads to a silo mentality and a mania for procedure, the challenge is a lack of flexibility. And weak leadership leads to a reluctance to change and the inability to mandate Lean as an innovation process.

They list four actionable steps for implementing Lean in Japanese corporations.  I think they’re relevant for all companies.

If you can’t see the presentation click here

Entrepreneurs are Everywhere Show No. 10: Reetu Gupta and Mandela Schumacher-Hodge

A startup is not a part-time activity. Trying to do a startup while keeping your day job may doom you to failure. So will failing to understand your customers.

Successful founders have a laser-like focus and commitment; a keen understanding of customers’ needs; and a tenacious spirit, said the latest guests on Entrepreneurs are Everywhere, my radio show on Sirius XM Channel 111.

Reetu Gupta

Reetu Gupta

Joining me in the Stanford University studio were:

Listen to the full interviews by downloading them from SoundCloud here and here. (And download any of the past shows here.)

Mandela Schumacher-Hodge

Mandela Schumacher-Hodge

Clips from their interviews are below, but first a word about the show:

Entrepreneurs are Everywhere airs Thursdays at 1 pm Pacific, 4 pm Eastern on Sirius XM Channel 111. It follows the entrepreneurial journeys of founders sharing their experiences of what it takes to build a startup – from restaurants to rocket scientists, to online gifts to online groceries to entrepreneurial education and more.

The program examines the DNA of entrepreneurs: what makes them tick, how they came up with their ideas; and explores the habits that make them successful, and the highs, lows and pivots that pushed them forward.

Before starting CirkledIn, Reetu Gupta spent 20 years in corporate America doing internal startups as well as marketing and engineering work at Fortune 50 companies including AT&T Wireless and Honeywell. In between, she started a wearable startup in her spare time, but failed. Here’s what happened:

Timing the market is a critical piece of any successful startup. We were early to the market. Even though there was a real need in the market it wasn’t right (the right time) for a wearable (product). Today, everybody is wearing an Apple watch, five years ago, not so much.

… another reason (we failed was that it was a) side project. …The thing is, when you do it as a side project, one, you don’t have enough fire under your feet. … You have consistent paycheck coming in. There’s no reason for you to freak out and you’re not running out of money and you’re not trying your best (and) your resources are diffused. …

If you can’t hear the clip, click here.

Named to Forbes 30 Under 30 in Education list in 2014, Mandela Schumacher-Hodge is a former high school teacher who later served as global director of Education Entrepreneurs, a Gates Foundation initiative operated within UP Global, now Techstars. Her first startup was Tioki, known as the LinkedIn for educators. 

While building Tioki, Mandela fell under the spell of her own reality distortion field:

One of the biggest lessons I learned was really understanding the problem… of your user. …. You think they want your product … or you think because you are one of those users everyone would want what you want. I think that I gave myself a little bit too much power in the sense of, well, I’m a teacher; I know what all teachers would want, instead of getting out of the building and really practicing those early skills I learned at Startup Weekend. Get out of the building and really talk to people. Really understand their pain points. …

… I (also) wish I would have just understood how this industry works a little bit better,” before jumping in, just so my expectations would be equal to what the circumstances would require of me, like constantly learning and iterating and being super agile. I don’t think I had ever had to be that way in my other career paths. That is a for sure requirement of entrepreneurship that I wasn’t aware that I would … I thought, “Oh, we’re getting funded. We made it.” But that’s just the beginning.

If you can’t hear the clip, click here.

Playing sports helped prepare her to be an entrepreneur:

The elements I learned from being an athlete, as well as a captain (are) first and foremost … being a teammate. I think that you can be an individual and build a great product, but in order to really turn it in to a fantastic sustainable company, you really have to understand team dynamics, and you really have to understand complementary roles and skill-sets, and how to position people in the right seats, at the right time, depending on where you are at, in a season, or in a game and, of course, (in) your startup life…

Steve:  … Team captain is a lot like the founder and CEO of a startup. We talk a lot about (how) startups need teams with complementary skills. … When you get a monoculture, you sometimes have a less successful startup. …

Mandela: … The teamwork aspect is huge. … Aside from teamwork, I would say a huge thing I learned was perseverance by being an athlete. When you want to give up, and you’re tired physically, mentally, and the effort it takes to just keep going, get up one more day, I have oftentimes found that’s when I score that last-minute goal. It’s the same thing in my entrepreneurial career: If I just stick with it and I put myself in uncomfortable situations, that’s oftentimes … where success is found.          

If you can’t hear the clip, click here.

Mandela gave up a Ph.D program to become an entrepreneur:

…I was on my way to the Ph.D… that I had worked my behind off to get into. It was a really big conundrum for me.

… I tend to feel like sometimes I am Super Woman. Like I can do everything. … (so) I was going to do both — naivete, right? So I started my PhD program. I did that for several months, and I started building the Tioki … with my co-founder.

…and I got quickly pushed on my behind — humbled you can call it — and I realized that I’m being good at two things but I’m not being great at either. I understood the importance of making a decision and having a laser-like focus to really hone in my energy, my time, everything on one thing. So I made the decision to drop out of the Ph.D program and take the plunge full time. 

If you can’t hear the clip, click here.

Today she is applying the lessons she learned from her Tioki experience to The Startup Couch:

I tried to learn lessons from my previous startup failure and this time around I didn’t launch anything for three months. I just solely tested and rather than go out and build a site I just utilized Medium to test the content. … Medium is a blogging platform and you can start a blog in a matter of seconds rather than investing time in WordPress which I did later. It was just an easy, light lift and I started blogging about these private struggles I had gone through with anxiety and depression and insecurity and financial strains, being broke — my cofounder got his car repo’d at one point. It got bad. And I was honest about it and people reacted. In that first month I got 20,000 hits and all this engagement, and I started doing surveys to see what are people doing to solve this solving that they say they, too, have.

If you can’t hear the clip, click here.

For Reetu, coming to America from India marked a watershed moment:

I always felt I was a misfit in India . … I don’t have any brothers and India is still a very male-dominated society. When I was growing up, it was really bad. Everybody used to feel sorry for my parents. I remember one particular incident when a next-door neighbor came with his three sons. It was a dispute. He said that my dad didn’t have any son to protect him. It used to boil my blood. I was very frustrated. I always used to tell my parents, “I’m going to be that son that you don’t have.”

… Women (in India) were not safe. Girls …couldn’t do this … couldn’t do that. I was very frustrated. In fact, I used to think, “I should write a book on how to raise a rebel in society.” It made me that rebel.

When I came to Maryland for the first time, I was like, “Oh my God, this is where I should have been born. This is where I fit. I can go to the store at night and not be afraid of getting killed.”

Just basic necessities are met. Infrastructure is there. There’s no corruption. You can really focus on things that you really care about. There’s running water in the sink and there are no potholes in the road. There’s no electricity card. I can focus on my career, my job, my business idea if I have one.

If you can’t hear the clip, click here. 

Reetu’s current startup idea came out of her experience of documenting her daughter’s achievements for a school application. Here’s how she validated it:

After we went through that process, I said there’s got to be a better way. I started Google-ing “kids’ profile,” “resume building,” and all of that, and I did not come up with anything. … The first thing I did was I made a lookalike of our website, what it would look like, and I went and started interviewing people. …

I had a Kindle and I took that to the mall. …I started in my neighborhood, everybody I met with, I said, introduce me to two other moms, two other parents, two other whatever. I interviewed a hundred people over two and a half months. At that time, we had three different offering ideas and I asked them to prioritize those three. Everybody asked for a profile. The words we heard were, “It’s a godsend, when can I have it? I wish I had it when I was growing up. This is a great idea.”

If you can’t hear the clip, click here.

Here’s Reetu’s advice for other founders:

One thing I will say is know what you are getting into. Entrepreneurship is very glamorized. You hear about 20-year-old billionaires, you hear about success stories. What you do not hear about, all the antidepressant consumption that’s going up. You do not hear all the failures of the startups that did not go anywhere, didn’t get any funding and died. It’s like, I say, it’s like child(birth): you do not know what you are getting into until you go through it.

… Just know that it’s harder than anything you have ever done.

If you can’t hear the clip, click here.

Listen to my full interviews with Reetu and Mandela by downloading them from SoundCloud here and here. (And download any of the past shows here.)

Next on Entrepreneurs are Everywhere: Elin Elkehag, founder of Vinna Ventures; and Hillary Hartley, deputy executive director and co-founder of 18F; in the first of three episodes recorded at the Lean Startup Conference.

Tune in Thursday at 1 pm PT, 4 pm ET on Sirius XM Channel 111.

Entrepreneurs are Everywhere Show No. 9: Jered Lawson and Chase Adam

Passion powers entrepreneurs; tenacity pulls them through, and entrepreneurship can do good for the world explained todays guests on Entrepreneurs are Everywhere, my radio show on Sirius XM Channel 111.

jered lawson

Jered Lawson

Joining me in the Stanford University studio were:

  • Jered Lawson, co-founder of Pie Ranch, a 14-acre farm on California’s San Mateo coast that is reconnecting people to their food
  • Chase Adam, founder of Watsi, is on a mission to provide healthcare for every person in the world
Chase Adam

Chase Adam

Listen to the full interviews by downloading them from SoundCloud here and here. (And download any of the past shows here.)

Clips from their interviews are below, but first a word about the show: Entrepreneurs are Everywhere airs Thursdays at 1 pm Pacific, 4 pm Eastern on Sirius XM Channel 111. It follows the entrepreneurial journeys of founders sharing their experiences of what it takes to build a startup – from restaurants to rocket scientists, to online gifts to online groceries to entrepreneurial education and more.

The program examines the DNA of entrepreneurs: what makes them tick, how they came up with their ideas; and explores the habits that make them successful, and the highs, lows and pivots that pushed them forward.

Jered Lawson discovered a passion for community farming while in college. He founded Pie Ranch to create a healthy local food system and educate the next generation of farmers. Although driven by a passion for changing our relation with food, Jered didn’t start out thinking of himself as an entrepreneur.

I think I had, in some ways, even consider(ed) myself the antithesis of an entrepreneur in the traditional sense of somebody who’s driven to create a business that’s profitable.  

… Now … I can see myself as somebody who had that entrepreneurial drive, but instead of thinking about personal gain … it was more about how do we create lasting social change?

If you can’t hear the clip, click here

Before founding Watsi, Chase Adam worked in a market intelligence company. He also worked in the Peace Corps in Costa Rica and helped start a national health program in Haiti. Here’s how his vision for Watsi kept him focused:

I think the first one I’ve learned is … to find something that I care about more than myself, to find a problem that I care about solving more than … anything else … that’s going on in my life right now. …It’s so easy to quit as an entrepreneur. …There are so many times when I’ve been tempted to quit or give up because it’s hard, it’s hard to start something new. If I didn’t believe so strongly in the end result and what we’re trying to build I think I would’ve given up 10 times over.

If you can’t hear the clip, click here

Both Jered and Chase looked for ways to make a big difference in the world.

Jered worked for a time helping other community farmers, then decided he wanted to help in a more hands-on way:

I got to that point where I thought, “All these places that I’m promoting for that connection to the farm … I would love that for myself as well.” I always had this idea that maybe I could have a hand in the production as well and… the person I fell in love with also shared that dream. …We had this idea that it would be great to start an educational farm that had a CSA (Community Supported Agriculture), that brought youth to the farm, and provide those same kinds of experiences that I had growing up in LA…

I think in some ways … the only way you can make a go at it, is to find other people that share such a … passion. … Farming is not like your high-tech startups. …

You’re recognized as a serial entrepreneur. We see ourselves as the other “cereal” entrepreneur but spelled with a “C.”

If you can’t hear the clip, click here.

After helping to set up banks through his work with the Peace Corps, Chase wanted to be a change agent on large scale. He discovered a way to do it on a bus ride in Costa Rica.

These banks I was helping to start were now running on their own. I essentially retired myself and said, “You guys do this and I’m going to work on some other things.” I came back to the States, hadn’t been back home in a year and a half … and tech was this big thing. …

Everyone in San Francisco was starting these tech companies. I had never … heard of a tech company, didn’t know what a startup was. These … guys and girls my age were raising millions of dollars to build apps and build startups that were reaching tens of millions of people. That to me just seemed crazy.

… I just spent a year trying to do a $2000 … offering for this bank to reach 100 people. I came back to Costa Rica after that trip back home and honestly I felt a little jaded. I was really excited about the work I was doing abroad but it felt really small … compared with the scale (of how) things were happening in San Francisco.       

It was an eight-hour bus ride… to where I was serving (in the Peace Corps). … After about seven hours, I’m now in the indigenous territory. A woman gets on the bus I’m riding on and … starts asking all of the local passengers for donations to pay for her son’s healthcare.

… It was a little embarrassing but I tuned her out because people get on the bus all the time … ask(ing) for donations (and)… no one ever donates. I remember looking up a few minutes later … and almost all the local passengers … are giving her donations.

… It turns she had her son’s medical record with her. It was in a red folder, she was passing it around the bus. …She really seemed to earn the trust of these local passengers. I gave a small donation, she got off the bus and a few minutes later I remember thinking, Why isn’t there a website for this? Why isn’t there a website that makes it really easy for people like this woman to raise money for healthcare?

… I got back to my little village and there was the indigenous government office about two miles away. It was the only place in the entire territory that had WiFi. …

… I just immediately draw my bags up at home, ran up there and … started Googling every combination of “funding healthcare,” “crowd-funding healthcare” I could think of. I thought surely this must exist.

(But) It didn’t exist. …

If you can’t hear the clip, click here.

Jered grew up in the city. His love of the outdoors was born on family vacations to Yosemite and at summer camp. Here he explains the origins of the Community Supported Agriculture (CSA) movement he’s working to foster.

It’s where a farm is … supported directly by a community of … the eaters … It’s …shared like investments. There are shareholders who commit in advance of the season, and then the dividend is their harvest. Every week throughout the harvest season you get that diversity of foods …being harvested from that farm.

… in the deepest way possible, (the community is) even closer to the farm than (they are buying at) a farmer’s market. There are usually events on the farm that families, households, individuals can (attend). There are regular newsletters that describe the activities… (such as) … “What’s happening with the drought,” or if there is a bumper crop of tomatoes, come on out and bring your family and pick some more, and do some canning. These kinds of direct relationships are … lost in our anonymous market place of the global food system.

… The first CSA in California was in 1988, and that was the farm … I visited as a 19-year-old … and planted pumpkin seeds. I was visiting a friend who was an apprentice on this farm, and he came back and visited me in the fall at UCSC, and brought me one of the pumpkins from the seeds that we planted.

That experience of … having the seed go in the ground, being out in this beautiful place with this amazing family, and people who were working this land, were all the ingredients for what to me was that kind of disruptive idea of a food system that’s really based on health, from seed to table.

If you can’t hear the clip, click here

Now he’s training next generation of farmers:

…We’ve come from a great training program just down the road at UCSC and we feel like there’s a really strong demand for skilled practitioners in organic farming, diversified organic farming, that’s really geared towards local markets.

Steve: You also supply food to some companies now in Silicon Valley, right?

Jered: …That’s … the third dimension of what we do. I got invited to participate in an innovation lab at Google, in their food program that brought …folks from all over the world to engage in this kind of thinking about the food system and how we can make it more healthful and just. … really a shared mission.

Steve: You’re apart from Silicon Valley but you’re connected as well.

Jered: Right. For us, it was such an exciting opportunity because clearly the power that exists on this side of the hill is part of what is needed to develop these kinds of more meaningful changes in our food system.

(Our vision is starting to come together.) … For the last two years, we’ve created … an institutional level CSA where the company’s food program commits in advance of the season and we bring them food from the farm on a regular basis.

If you can’t hear the clip, click here.

Chase shared what happened when Watsi launched:

… We’d had one of these coming soon sites. “We have this nonprofit. Sign up now and we’ll notify you when it launches,” and we had about 600 people sign up. … The morning we launched, we sent this e-mail to 600 people saying, “Hey, we have this website. It’s now live.”

(By this time, we had 10 people from the hospital we had partnered with) who needed money.

… We launched at 9 am and …I remember thinking, “Okay, it’s going to go viral. This is it. It’s going to be the next big thing,” and we waited a few minutes and I’m looking at the list of donors. There are no donors. … and then my mom donated and then …my co-founder’s mom donated.

… and our friends donated, we had this little stream of donations and then it just died. By 10 am, no more donors. … It was a little depressing.

… I had been an avid reader of (the online news forum) Hacker News (and)… posted a link to Hacker News (at around 10:30). … It said, “I want to show Hacker News this website we just built to save lives. Give us your feedback.” The idea was that people would look at this website and critique it. … Within an hour, it was the No. 1 post on Hacker News. … 16,000 people visited Watsi in that first day …

It … exceeded all of our expectations. … (the traffic briefly crashed the site, but) once the site was back up, in about an hour we funded healthcare for every single patient we had. …

If you can’t hear the clip, click here

Watsi was the first nonprofit Y Combinator supported. Here’s how the company got on the accelerator’s radar.

The goal was to fund-raise. We didn’t have any money in the bank. I had three months of savings….In that period of time, I needed to …raise enough money to at least pay my salary to help me keep going. (But) everyone turned us down … because we didn’t understand how to fund-raise as an organization. We didn’t have any connections. We didn’t know anyone in Silicon Valley. We didn’t know anyone in the foundation world. We just didn’t know how you went about raising money for a nonprofit organization. A big thing we learned is that in the nonprofit world, funders tend to be very risk adverse. 

… Everyone talked to us and said, “This is a good idea but I’m going to give it another six months, give it another year and see what happens.”

…We got really desperate for money. After about 2 1/2 months … I had about 2 or 3 weeks left of savings, until I was going to have to move in with my mom. The Huffington Post had this online voting competition. (If) you got enough people to vote for your nonprofit, you would win $10,000. At that point … I thought I could live on $10,000 for a year. This is it. This is all I need.

… We get to the finals of this voting competition. It’s us versus one other organization. …. The last night of this competition … we’re neck and neck. … It’s about 10 pm, the voting ends at midnight and I’m out of ideas. I’ve asked every single one of my Facebook friends to vote, multiple times. All of the sudden, I notice that we start to take off; we start to get all of these votes. (Turns out) Grace, my co-founder, was at a bar in San Diego (and) convinced the bouncer … to make every single person vote on their phones for Watsi before they entered the bar. …We ended up winning the competition.

… Then, we ended up meeting Paul Graham, founder of Y Combinator. He wrote us our first big check. …

If you can’t hear the clip, click here

Listen to my full interviews with Jered and Chase by downloading them from SoundCloud here and here. (And download any of the past shows here.)

Next on Entrepreneurs are Everywhere: Reetu Gupta, co-founder of CirkledIn and Mandela Schumacher-Hodge, founder of The Startup Couch.

Tune in Thursday at 1 pm PT, 4 pm ET on Sirius XM Channel 111.

Entrepreneurs are Everywhere Show No. 8: Phil Randazzo and Derek Andersen

Successful entrepreneurs show up a lot and make their own luck. And they are resilient – they’re able to bounce back after failure.  Both of these traits made all the difference for the two latest guests on Entrepreneurs are Everywhere, my radio show on Sirius XM Channel 111.

Phil Randazzo

Phil Randazzo

Joining me in the Stanford University studio were

  • Phil Randazzo, is the founder of American Dream U, a national entrepreneurship and coaching program that helps transitioning soldiers find work or start their own business
  • Derek Andersen, is the founder of Startup Grind, a 200,000-person entrepreneurial community with chapters in 75 countries run by more than 1,000 volunteers
Derek Andersen

Derek Andersen

Listen to the full interviews by downloading them from SoundCloud here and here (And download any of the past shows here.)

Clips from their interviews are below, but first a word about the show:

Entrepreneurs are Everywhere airs Thursdays at 1 pm Pacific, 4 pm Eastern on Sirius XM Channel 111. It follows the entrepreneurial journeys of founders sharing their experiences of what it takes to build a startup – from restaurants to rocket scientists, to online gifts to online groceries to entrepreneurial education and more.

The program examines the DNA of entrepreneurs: what makes them tick, how they came up with their ideas; and explores the habits that make them successful, and the highs, lows and pivots that pushed them forward.

Phil Randazzo is a serial entrepreneur and the founder of American Dream U, a nonprofit that helps soldiers transition to civilian life. Phil also owns Nevada Benefits Corp; and is the co-founder of Drive Safe Mode, an app that prevents teens from texting while driving. In addition, he started Capital MD, Inc., a medical billing and financial company; and owns interest in 44 Subway Sandwich shops and in Source Intelligence compliance firm.

In short, Phil has a lot of ideas and is eager to make them work.

I get bored really easy. … (so) I just start new things. (The) first thing was I wanted to be a land developer because I wanted to be my own builder. What did I know about land development? (But) someone told me it’s better to own than to rent. … (So) I bought some land. I had a meeting with a guy who lived (next to) the land and I said, “Hey. I can’t buy this whole piece. You want to go in with me?” He went in with me. … I’m still in that building today. 

… I bought several buildings. People think I’m smart because I sold a lot of (buildings) in Las Vegas (at the peak) in ’04 and ’05, before the big crash. I just was lucky. 

Steve: … entrepreneurs make their own luck. … I’ll contend that showing up a lot, trying a lot of things (makes a big difference). If you’re just sitting at home saying, “Woe is me,” that’s pretty different than, “Hey, I tried X, I tried Y, and I tried whoa!” That’s not luck. … 80% of entrepreneurship, I’ll contend, is (showing up so you can be) in the game.

Phil: For sure. There’s that movie, The Secret, where you wish and hope things happen to you. (The reality is that) if you don’t act and there’s no movement, nothing happens.

If you can’t hear the clip, click here

Before founding Startup Grind, Derek Andersen spent four years in product management at Electronic Arts working on games like The Godfather, Burnout, The Sims 3, and Mirror’s Edge. He left EA in 2009 to start Vaporware Labs, a product incubator that mostly failed, but also created products including Commonred, which was acquired by in 2012. His first startup, built soon after the birth of his son, was advertising on trucks. Here’s what happened:

… It was a bad idea, because … in spite of all my efforts I couldn’t beg anyone to buy it. I worked for months on it and eventually realized I was just spinning my tires. … It was the wrong product and people didn’t want it. …

… I felt awful because I just quit my job. Not only that, but when I told Electronic Arts I was going to quit, this is in the summer of ’09… the middle of … the Great Recession. My boss called me and said, “Look, if you’ll stay we’ll give you a double promotion and a 25 percent raise.” … 

…. Here I am. I’ve just quit and I’ve turned down this huge thing and … my brilliant idea is nothing. … It was heartbreaking. …

Steve: So why didn’t you go back to EA?

Derek: Like every great entrepreneur I would’ve been too embarrassed to go back.  

Steve: So that’s a big idea … a little hubris. You said no, I’m right, just wrong idea. I’d do it again.

Derek: Yeah. …

… (And when a friend with a new startup called asking me to do some marketing for him) I said, I’m totally focused on on this truck idea. I can’t deviate from that. He said, “Well, why don’t you (work for me for) 20 hours a week?”

I said, “How much would you pay me?” He said, “Well, how about 80 bucks an hour? 

It’s one of those moments where you remember exactly where you were. … I looked at the phone and my jaw dropped. I put it back to my ear and said, “I couldn’t do it for anything less than 85. … So for those 20 hours a week, I could pay all of our bills, and that felt really good. 

If you can’t hear the clip, click here.

Here’s why working at big companies wasn’t for Derek:

I was working really hard. I was the first person in. I was the last person out every day. I was rated in the top 2 percent of the entire organization. One day I was having lunch with my boss and I’d worked really hard on the weekend, and he said, “Hey. You need to do XYZ more.”

I said, “Look. I’m not getting paid like an investment banker. I’m working as hard as I can. I’m already working harder than everyone.”

…A few hours later, he pulled me into his office and he said, “Hey. I’ve rallied for you. I’ve really worked hard and I’ve gotten you a … $4,000 raise.”

The biggest thing that bothered me about it was, not that it was only $4,000, which was laughable, but I said to myself, if it takes me complaining or, if people don’t notice my work, then it’s just not worth it to me.

I didn’t want to be a cog in the system. Then I realized, if I worked 110 percent, I was in the top 2 percent. Then I had this great epiphany. … I realized if I worked about 70 percent, I would still be rated in the top 90 percent. I started going to Starbucks in the morning and working for an hour and half. Then I’d come in, I’d be like the third person in. Then at night, I would go home earlier and I would just work on my own projects.

If you can’t hear the clip, click here.

Like many founders, Phil was not academically inclined:

My senior year, I finished with a whopping 1.8 GPA … I was ineligible to play sports. I was not a great student to say the least. I didn’t even like attending class. …

…The good thing was, back in the day when I went to school, they didn’t have online reporting. I used to run home and take all the notices out of the mailbox before my parents would see them whether it was poor grades or I think I set the record for the most absentees.

My dad was an immigrant from Italy. He was born in Sicily. … He was a smart kid as well. … (and went) to University of Chicago as a junior in high school. He skipped through. School is really important to him so I think I was a little bit of disappointment. …

If you can’t hear the clip, click here.

But Phil has an incredible work ethic:

(My) wife of 24 years … got pregnant, while I was still in college. …I had to grow up pretty quick, and figure out how to support a family. … I worked my way through it. I did odd jobs.

I ended up getting a job as 100 percent commission salesperson selling insurance. It built both (character and desperation).

Then I had two other …. jobs, and my wife worked two jobs. … I delivered newspapers at night … for the Las Vegas Review Journal. Then I helped write parole and probation reports for first-time offenders. …My wife had a daycare in our apartment, and worked at SafeKey in the school district. …

(The work ethic) definitely (came) from my father … he really instilled in me, (that) hard work solves a lot of problems.

If you can’t hear the clip, click here.

And a resilient spirit

… if you look at my background and look at my education, I would not be .. one that (you might guess) would be (an entrepreneur) …. I did not drop out of Stanford to start (a company). … Anyone can be an entrepreneur…

… I think we are either winning or learning, and I have a lot of failures. I considered those learning experiences, some of them are really expensive learning experiences.

… You are going to hear a lot of chatter from friends and naysayers. …

Probably the biggest thing was, “Ah, Phil, you can’t possibly do that.” Right?

I was voted second class clown in high school. And I was actually funnier… than first guy. My whole life it was like, the joke of my house, was my dad would say I was going to be the head dishwasher and my sister was going to be the assistant head dishwasher. …

Resilience, is not listening to all the noise going around – that’s big.  

If you can’t hear the clip, click here.

World-class entrepreneurs are comfortable in chaos, and Derek is no exception. Here’s how he learned to embrace new experiences:

When I was young my family moved to Europe. My dad was working over there, and we spent six years moving across Europe and then back across the United States. I was, at one point, in 10 schools in 10 years. …

(The travel) affected us a lot. … it either makes you stronger or it kind of turns you into a mess. I don’t know which one I ended up being, but it brought our family very close together. At times the only friends we had were our brothers and sisters. …

It was interesting because every year was … in some ways … a new startup because I knew every year I would be saying goodbye to everyone, and so I would start fresh somewhere new. Each summer as I started the new year I would say, “OK, this didn’t work last year. This didn’t work. I’m going to try this. I’m going try this.” You try to make friends as quickly as you could, or you cry yourself to sleep.

If you can’t hear the clip, click here.

Startup Grind evolved from an effort to help fellow entrepreneurs, but didn’t take off immediately. Here’s how Derek made it work:

We tried … all these different platforms. Every month … kind of like school, it became a new cycle. … We tried apps, we tried different technologies, we tried different formats, and nothing really worked. I had this event where we had four people come, and I got in the car and I remember saying to myself, “What a freaking waste of time.”

… This is four years ago. (It) was a one night a month thing… a side project just for fun, and I’m building the game and then I was building Commonred, these were the things that I was really focused on building.

(But then) I decided that even if it was a side project, I was either going to do a job I was really proud with, or I was going to shut it down and stop wasting my time. …

Six weeks later, we got a speaker who had sold his company to Oracle. We brought him in, he was a friend of Spencer’s, the guy who started with me, and we had 40 people show up. No one was more shocked than me. I didn’t know hardly any of them. They weren’t my friends who I had been begging to come. We … had our epiphany of “Wow, we need speakers. We need people who have their own brand who can share. We need to raise the education bar of these events.” The next month we had a bigger speaker who’s a friend, and we had 55 people. …

Then the next week, or the next month, we had 80, and the next month we had 100, and then the next month after that, which was our 1-year anniversary, I invited Jason Calcanis to speak, who’s a fairly well-known investor and entrepreneur in technology, and he said, “Look, I don’t have time to prepare a talk. … But if you want to interview me, I’ll just show up for an hour and then I’m going to leave.”

And I said, “Great, no problem. I can interview you. That’s easy.” So I prepared an interview, we filmed it, it’s still online, our very first interview. (People can see it on) …

People really liked it, and it was so easy for the speakers, so the value proposition kind of aligned that night, where the speaker could come in and they just had to share their knowledge. They didn’t have to prepare anything, and they could leave. They get a really great hour of mentorship. The audience had this really great value proposition because they got to really get close to the speaker (and network with themselves), and then it was great for me as the organizer, because I got to get to know this guy.

If you can’t hear the clip, click here.

Listen to my full interviews with Phil and Derek by downloading them from SoundCloud here and here. (And download any of the past shows here.)

Next on Entrepreneurs are Everywhere: Jered Lawson, co-founder of Pie Ranch, and Chase Adam, founder of Watsi.

Tune in today at 1 pm PT, 4 pm ET on Sirius XM Channel 111.

Pixar, Artists, Founders and Corporate Innovation

I’m still surprised when I find unexpected connections with innovation in different industries.


In a recent workshop with a large company focused on the Innovation@50x process, I mentioned that founders and intraprenuers operate more like artists than accountants – on day one they see something no one else does. One of the innovators in the room said, “It sounds like you’re describing exactly what Ed Catmull the CEO of Pixar wrote in Creativity, Inc.”creativity inc

Say what?  I kicked myself knowing that I should have thought of Pixar.

While I’m sure Ed Catmull doesn’t remember, when Pixar was a startup selling the Image Computer, their VP of Sales and Marketing brought me in to put together their marketing strategy. John Lassiter was just beginning to make commercials, Alvy Ray Smith was building Iceman and Loren Carpenter and Rob Cook were writing Renderman.

I should have realized there was a ton I could learn about corporate creativity by looking at Pixar.

So I bought the book.


I always thought that when I used the “founders as artists” analogy, the “artists” I was describing were painters, writers, sculptors and composers. I wondered what lessons Pixar, an animation studio, could have for founders. What were the parallels? Startup founders operate in chaos and uncertainty. Founders get out of the building to talk to customers. We create minimal viable products to test hypotheses/our vision, and we build a culture that supports innovation. It never occurred to me that the directors of 3D animated movies at Pixar could be the same “founders as artists.”

It turns out that they are. And in fact, the creative process at Pixar has a ton of lessons for both startup founders and corporate innovators.

Directors = Startup Founder
Pixar is a filmmaker-driven studio. That means the entire company is driven by directors – the artists – not by corporate executives in management with MBA’s or financial models or a development department.

A director at Pixar is the equivalent of a startup founder. At Pixar a director’s vision for a film is much like a founder’s vision for a startup. The director starts with a vision of a great story he wants to turn into an animated movie. On day one, all a director has is his vision – she doesn’t yet know the exact path to get to the final movie. (Like a startup founder.) Pixar directors use their ability to tell a compelling story to convince management that their initial idea is powerful enough to be a great movie. (Like a startup.) They get approval, build and rally a team, get their team out of the building and do research and iterate and at times pivot the story/film as they refine the vision of the movie. (Like a startup.) Once their idea is approved, the company organizes its technical and production resources (hundreds of people on each movie) behind those directors to turn their vision into a great movie that lots of people will go see. (Like a startup.)

It Starts With a Vision
While the parallels between a director and a startup founder are striking, what’s even more surprising is the match between the creative process Pixar uses to make its movies and our implementation of Lean for startups in the Lean LaunchPad and I-Corps incubators.

When Pixar begins a new movie the movie doesn’t exist yet. It’s only an idea in the head of the director (or in the case of a startup, the founder.) How the director crafts reality out of this vision is exactly like how a founder creates a startup – it’s a combination of vision, reality distortion field, tenacity and persuasion.

pixarDirectors, like founders, develop mental models for how they search for an unseen destination – they “get in the zone.” Some directors view it as finding a way out of a maze, or looking for a light at the end of a tunnel or uncovering a buried mountain.

Greenlight = VC Funding
At Pixar, if you’re a director with a passion for a project you pitch a very simple minimum viable product – in this case storyboards which are just rough illustrations that help to tell the story page by page. If you can convince John Lasseter, Pixar’s chief creative officer, the film will be greenlit – it gets funding. The process is akin to pitching a VC firm.

Braintrust = Continual Feedback
One of the systems that Pixar has put in place to keep the development of a movie on track is regular doses of open and honest feedback from other experienced directors in regularly scheduled meetings called the “Braintrust.” A director shares his latest progress in the the form of storyboards, demo reels, etc. (what we in startup world would call the minimum viable product) and the critiques from other directors take the the form of comments like, “Have you considered x or thought about y?” Directors are free to come up with their own solutions. But if feedback from the Braintrust is given and nothing changes… that’s a problem. And if the director loses the confidence of his crew, Pixar management steps in.

In the Lean LaunchPad/I-Corps our equivalent to the Braintrust are weekly meetings where teams present what they learned from talking to customers and show their latest minimum viable products, and instructors provide continuous feedback.

I found other parallels between Pixar’s method for managing innovation and what we built in the Lean LaunchPad/I-Corps incubators. (Oren Jacob, Pixar’s ex CTO has been teaching with us at Berkeley and Stanford and has been trying to point out this connection for years!)

Innovation Management – Animation and Startups
Dailies are the way animators (and movie makers) show and measure progress. Everyone can comment but the director decides what changes, if any, to make. Dailies are Pixar equivalents of showing your incremental MVP’s- minimum viable products. In the Lean LaunchPad/I-Corps, we make our teams show us MVP’s weekly to measure progress.

Research trips – Pixar wanted to avoid the trap of cutting up and reassembling what was done in previous movies so they instituted research trips – “getting out of the building” to get authenticity and keep clichés at bay. Pixar animators flew to Hawaii and went scuba diving for Finding Nemo, to Scotland while they were making Brave and drove Route 66 when making Cars. Pixar movies feel authentic because they’re modeled after the real world.

Lean Startups are built around the same notion as Pixar research trips. With startups, there are no facts inside your building so founders have to get the heck outside. Entrepreneurs work hard at becoming the customer, so they can understand customers needs and wants and experience the customer’s the day-in-the-life.

Pivots – Directors can pivot as long as their team can believe the reasons for changing course. When you lose your team’s trust, the team will bail. Same is true for startup founders. And if pivots don’t work or the Pixar Braintrust feels that after lots of feedback, the movie still is heading in the wrong direction, they replace the director – identical when a founder loses the the board’s confidence and gets replaced.

The power of limits – Although Pixar movies are incredibly detailed, one of their strengths is knowing when to stop.  In a startup knowing that every feature isn’t necessary and knowing what not to ship, is the art of a founder.

Postmortems – After a film is completed, Pixar holds a postmortem, a meeting to summarize what worked, what didn’t and what they could do better next time.  In the Lean LaunchPad/I-Corps classes, the teaching team does post mortems weekly and then a final wrap-up after class. More importantly, our teams’ final presentation are not a Demo Day, but a Lesson Learned presentation summarizing what they hypothesized, what they did and what they learned. 

Artists and Founders

Pixar            Startups
Visionary Director Founder
Discovery Research Trips Customer Development
Outside Feedback Braintrust feedback Weekly team feedback in
Lean LaunchPad/I-Corps
Progress Dailies Minimum Viable Products
Continuous Learning Post mortems Lessons Learned Day &
Instructor Post Mortems

Continuous corporate innovation @ Pixar
While the parallels between individual Pixar movies and startups is striking, Pixar’s CEO Ed Catmull has built is a company that has continued to innovate, making hit after hit.  While part of Pixar’s success has been built on a series of world class directors (John Lasseter, Pete Docter, Brad Bird, Andrew Stanton, Lee Unkrich), what makes Pixar unique is that in a “hits-based business” they’ve figured out how to turn directors’ visions into blockbuster movies repeatedly. Pixar has built a process of continuous corporate innovation.

Innovation Killers – Pixar Lessons for Corporate Innovation
Ed Catmull points than one of the impediments to innovation in a large company is the “fear of failure”. In a fear-based culture people avoid risk. They repeat things that are safe and have worked in the past. His solution at Pixar was to get directors to talk about mistakes and their part in them.  Surfacing failure publically by the most respected innovators makes it safe for others to do the same. (Getting middle management to tolerate and not feel threatened by problems and surprises is one of the biggest jobs of Pixar’s CEO and senior leadership.)

The second innovation insight at Pixar is the power of iterative trial and error – the notion of being wrong fast. (One of the key tenets of the Lean Startup.) Catmull observed that even the smartest person can’t consider all possible outcomes. Managers who over-plan just take longer to be wrong. Managers see change as a threat to their existing business model – and it is. Self-interest motivates opposition to change but lack of self awareness fuels it even more.

Finally, Catmull’s observation that “originality is fragile” speaks to the startup process as well as to making movies. At Pixar in it’s first moments, originality is often far from pretty. Early mockups of Pixar films are called “ugly babies.”  However, while it may be ugly, it’s the opposite of the established and entrenched. (We remind large companies that version 1.0 of disruption – these ugly babies – coming their way always looks like a toy.)


Lessons Learned

  • Founders are closer to artists than any other profession
  • Founders and Pixar directors have uncanny parallels
  • Pixar, more than Apple, Google, Amazon or any other large company, holds the record for continuous innovation
  • Pixar and the Lean LaunchPad/I-Corps share common ways to support repeatable innovation and market success

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